Prohibition of short selling despite the rebound of TAIEX; US policy remains worrying

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  • By Kao Shih-ching / Staff Reporter

The Financial Supervisory Commission does not plan to end its ban on shorting local equities, despite a recent rebound in TAIEX, as US monetary policy remains on a tightening trajectory, the commission’s chairman said yesterday, Thomas Huang (黃天牧).

“It hasn’t been a month since the ban on short selling was put in place. Now is not the time to remove it,” Huang told a meeting of the legislature’s finance committee in Taipei.

The commission should continue to monitor developments in global financial markets and how foreign regulators set their monetary policies, at least until the next rate hike by the US Federal Reserve, Huang said.

Photo: Chu Pei-hsiung, Taipei Times

US stocks rallied last week after the latest US inflation reading showed a slower-than-expected rise last month.

The rally is the result of investors’ relief from inflation, but does not portend a change in US monetary policy, Huang said.

The TAIEX closed above 14,000 points on Friday and continued higher yesterday, which Huang said reflected investor confidence in Wall Street as well as an improving outlook for some local industries.

However, the commission must observe market trends for some time before deciding whether to end the short-selling ban, he said.

“Whether the TAIEX broke a specific level, such as 14,000 points, is not the deciding factor. We care more about whether local stocks have really stabilized,” Huang said.

When the commission introduced similar measures in previous years to stabilize local stocks, it only lifted the controls when local stocks stabilized over a longer period, he said.

Meanwhile, the government’s NT$500 billion ($16.07 billion) National Stabilization Fund should continue to support local actions, Finance Minister Su Jain-rong (蘇建榮) said yesterday during the same meeting.

Four issues would be deciding factors as to when the fund should be withdrawn: the pace of Fed rate hikes, trade tensions between the United States and China, the war in Ukraine and strict measures to prevent COVID. -19 from China, Su said.

The ministry is due to discuss whether the fund should exit the market at its next quarterly meeting, he said.

The National Stabilization Fund has been supporting local stocks since July 13, the eighth time it entered the market, according to ministry data.

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